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Motorists considering getting their hands on a new model using auto financing will have to pay 40 percent more monthly payments than they would have made in 2019, according to a market survey of mystery shoppers.
Analysis by which car? of typical finance deals offered for five popular models that also went on sale three years ago revealed that average monthly payments for personal contract purchases (PCP) have increased by at least 22.4 percent.
This is due to a combination of rising vehicle prices, caused by post-pandemic parts supply issues, and skyrocketing interest rates.
Rising vehicle prices driven by supply shortages, plus rising interest rates, mean buyers taking advantage of car financing deals can expect to pay at least 22% more per month than they did in 2019 for popular new models, a new study finds
The five models used for the analysis were the Ford Puma, Mini hatchback, Seat Ateca, Volkswagen Golf and Volvo XC40 – all of which were specifically chosen as they have been on sale in their current form since 2019 and are therefore ideal for comparison purposes.
All five have registered an increase in list price of at least 11 percent.
This is due to a combination of factors, not least the increased cost of some components and materials – including semiconductors – due to supply shortages since the pandemic.
The shortage of parts available has also seen many manufacturers make major changes to the trim levels they offer, with the cheapest available versions usually removed from order books, driving up the average price across the range.
Monthly payments for the average Ford Puma SUV are 22.4% higher today than in 2019
The average PCP deal for a Mini Hatchback is almost a quarter more expensive than 3 years ago, mainly due to a huge price increase
If you were to take out a PCP finance deal on a Seat Ateca today, the average monthly payments would be £426. Which car in 2019? says these were only £322
But monthly financial payments are also inflated by higher interest rates.
Interest on monthly payments for one of the cars surveyed is three times higher than in 2019.
The APR (annual percentage) on a Ford Puma three years ago was just 1.2 percent, but is now a whopping 4.9 percent, What Car?’s mystery shopping team found.
In the sample surveyed, the petrol and hybrid variants of the Volvo XC40 were hardest hit, with average monthly payments up a whopping 42.5 percent from this time three years ago.
VW Golfs have experienced a price increase of 12.4% on average, mainly because Volkswagen has removed some of the cheaper trim levels due to parts shortages. Monthly PCP payments are up 27% today compared to 2019
The PCP APR on a new Volvo XC40 today is now an average of 10.5%. Just 3 years ago the average was 5.9%, says What Car? This has made average monthly payments £150 more expensive
Some cars are still cheaper on financing
However, despite rising interest rates and costs, the study found that some new cars are still cheaper to buy with financing than buying with cash.
For example, buyers who opt for a 42-month PCP deal on a Toyota C-HR Hybrid SUV stand to save 4.6 per cent off the list price when financing the vehicle, thanks to a generous deposit contribution of up to £1,250 and a low interest rate of 1.9 percent.
The money savings equates to £1,362 over the 42 month ownership cycle.
Similarly, the Ford Ecosport SUV and BMW 5 Series are cheaper than their original list price when bought with PCP financing, with savings of 3.8 per cent and 2.1 per cent, equating to £887 and £1,202 respectively above list price. ? found it.
Covid, semiconductor shortages and energy price increases have combined to create a lot of turmoil in the new car market…
Steve Huntingford, editor at What Car?
While the study highlights buyers’ need to shop around to find the best deal, there are mounting concerns about the amount of debt currently tied up in car financing at a time when Britons are experiencing a cost-of-living crisis.
Lending on vehicles is up 253 per cent in just over a decade, from £11.2bn a year in 2009 to almost £39.6bn in the last 12 months.
With average wages failing to keep up with this level of growth and food prices, utility bills and inflation all gaining momentum in 2022, there are fears that many Britons locked into financing arrangements will struggle to keep up with debt payments and defaults.
What Car? editor Steve Huntingford said: “PCP financing is the most popular choice for new car buyers, but the differences between the offers available today show how important it is to do your research to compare deals and consider other options, such as banking. loans when financing a vehicle.
“The automotive industry is not immune to the challenges of Covid, semiconductor shortages and now rising energy prices, and they have combined to create a lot of turmoil in the new car market.
“However, the price increases aren’t universal, nor do they always apply to finance and cash purchases, so it’s still possible to snag a tempting deal if you shop around or use our free new car purchase service.”
| Fashion model | Edition | Percentage savings over original list price** | OTR*** | PCP monthly | PCP offer | PCP Annual Mileage | PCP Total payable | Save on cash purchase |
|---|---|---|---|---|---|---|---|---|
| Toyota C-HR | 1.8 hybrid icon | 4.60% | £29,330 | £269 | 3.5 yr 1.9% APR PCP with £1250 cash deposit fee | 8000 | £27,968 | £1,362 |
| BMW 5 Series | 530d xDrive M Sport | 2.10% | £57,050 | £556 | 4 Years 4.9% APR PCP with £0 Funding Deposit Contribution | 8000 | £55,848 | £1,202 |
| Ford Ecosport | 1.0 Ecoboost 125 Titanium | 3.80% | £23,435 | £265 | 3 years 3.9% APR PCP with £1250 cash deposit fee | 9000 | £22,548 | £887 |
| Lexus UX | 250 hours | 2.00% | £34,750 | £319 | 4 Years 6.9% APR PCP with £3000 Funding Deposit Contribution | 8000 | £34,055 | £695 |
| Volvo XC90 | 2.0 B5P [250] Core AWD Geartronic | 0.90% | £61,995 | £768 | 4 Years 9.9% APR PCP with £6000 Funding Deposit Contribution | 8000 | £61,457 | £538 |
| Toyota Yaris | 1.5 hybrid design | 1.00% | £22,520 | £208 | 3.5 yr 6.9% APR PCP with £1750 cash deposit fee | 8000 | £22,292 | £228 |
| Renault Arcana | 1.3 Mild Hybrid 140 Techno EDC | -1.80% | £28,795 | £266 | 4yr 6.4% APR PCP with £2100 financial deposit fee | 8000 | £29,308 | – £513 |
| Toyota Corolla | 2.0 Hybrid Excel | -1.50% | £34,545 | £377 | 3.5yr 4.9% APR PCP with £2250 Funding Deposit Contribution | 8000 | £35,075 | – £530 |
| Ford Kuga | 2.5 PHEV ST-Line Edition | -1.50% | £37,755 | £389 | 3 Years 3.9% APR PCP with £500 Cash Deposit Fee | 9000 | £38,324 | – £569 |
| Volkswagen Arteon | 1.5 TSI R Line | -1.50% | £38,660 | £445 | 4 Years 9.2% APR PCP with £4450 Funding Deposit Contribution | 10000 | £39,248 | – £588 |
| Source: which car? *The mystery shoppers of What Car? have compiled the top 10 PCP offerings for popular new models, based on percentage savings over the original list price, all data is based on the listed PCP offering and a 15% down payment (of the list price). **The percentage savings from the original list price is calculated as the percentage savings if the vehicle is purchased entirely through PCP financing than a cash purchase. A positive percentage implies total savings when purchased on financing, while a negative percentage implies the vehicle costs more to purchase on financing than cash. ***OTR = Price en route | ||||||||
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